Clients pay in advance and amount show in the account


R

Remco

Dear All,

I have a yoga studio where clients pay me in advance for services.

Example:

A new client joins the studio.

I sent them an invoice for 5 sessions a $50

The client pays this invoice for 5x$50= $ 250

The account for the client now shows 0 ( Invoice is paid)

I would like the account to show a $250 credit and everytime the client uses
some of our services the amount is deducted from the $250.

How can I set this up?

Because when I send an invoice it comes in account receivable and when paid
this is 0ed out.

Any ideas?

Thank you in advance!

Best regards,

Remco
 
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D

dan39

I guess the first question to ask is, are you cash or accrual basis?


If cash you are done.


If accrual you can create a "prepaid yoga services" acct and credit (income)
that account when invoicing. This is a balance sheet acct so you should not
see anything on your P&L since you shouldn't realize income until the service
is actually provided.

of course this is the problem, what is the easiest way. Is it a weekly
session is it arbitrary as to when the client comes in?

You would need to do a J/E where you debit this "prepaid yoga" and credit
the appropriate income account everytime the person came. If you know the
exact future dates you can just do it in the J/E.

Then create a J/E where you debit the income
 
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G

GAAPMan

There is alternative solution, however, if you are on a cash basis your
accountant or you will need to make an adjusting entry at year-end to bring
your income from an accrual basis to a cash basis for tax purposes. Instead
of creating an invoice through MS Accounting create a memo billing for your
clients in word or excel. The memo invoice is merly to request the advance
deposit you are seeking. Once you receive the payment apply the ($250.00) to
the customers account. When I say apply it to his/her account do not apply it
against any outstanding balance (uncheck any existing invoices). This will
put a credit of $250.00 on the account. As you provide the individual lessons
create an invoice and apply the credit against it. This will provide a
running balance of the remaining deposit. Very few systems have a second
subsidary ledger for tracking deposits or advance payments. At year-end an
adusting entry will be required to zero out the remaining credit balances
for adavance payments if you are are on a cash basis. After you prepare year
end and print it off, reverse the accrual to cash bases adjusting JE
(effective January 1 of the new year) and you are good to go.
 

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